Despite the bearish bet on Micron Technology, Inc. (NASDAQ: MU) at very low levels, confidence is getting shaken out of the stock. Thanks to a downgrade, plus worries over U.S. trade wars with China, the stock is hovering at the $50 a share level. The 6 times P/E and 5 times forward P/E are not the only metrics that suggest the stock is cheap. The company’s relatively strong prospects in the chip space make MU stock a compelling tech investment.
The 5.96% short float bet against Micron is negligible but could be enough to ignite a rally. But on Apr. 5, UBS advised traders to dump Intel (NASDAQ: INTC) stock and to hold Micron shares instead. A steady fall in DDR prices could have a negative impact on Micron and semiconductor suppliers. Samsung (OTC: SSNLF), Applied Materials (NASDAQ: AMAT), and Lam Research (NASDAQ: LRCX) are all down from their peak in March over that worry.
Trade wars are also a negative development. 51% of Micron’s sales are in the Chinese region, so if Trump and China both make good on their word to slap taxes on imports, MU’s risks will turn real. Its single-digit P/Es will look expensive because the outlook weakened.
Takeaway
China/US are both at a disadvantage if tariffs are implemented. Should this play out, this could prove short-term. Once both sides agree on better terms, tariffs will be lifted and growth will resume.
Tech Insider
